Reply To: West rich because Third World poor?


People trade when there is a difference in value. Whether a consumer good, producer good, or money a difference in the value of something will result in trade away from lower-valued and toward higher-valued uses. As the good is arbitraged in this way its price will tend to become uniform.

If bread prices are lower in the countryside and higher in the city, then sellers will shift supply to the city and buyers will shift demand to the countryside. The price will fall in the city and rise in the countryside until no additional advantage exists in such arbitrage.

If wages are lower in one country and higher in another, then sellers of labor (workers) will move supply from the former to the later and buyers of labor (capitalist-entrepreneurs) will move demand from the later to the former. Wages will come together until no advantage exits in further arbitrage. Everyone benefits from the greater production of consumer goods made possible by the further extension of the division of labor. The greater production of goods will push their prices down generally, given no change in the money relation.